Freight shipping appears to be making a comeback as a viable option for moving goods and produce through various distribution points across the country. According to the Cass Freight Index report for January 2015, a measurement of the overall freight volumes and expenditures made through North America, the shipments index is at its highest start since January 2012. This despite the fact that overall month-to-month (December 2014 – January 2015) shipments were off 4.7 percent. 2014 marked the best year for the supply chain industry, which includes freight shippers, since the Great Recession (December 2007 – June 2009).
An additional measure by Cass, the Cass Truckload Linehaul Index, which measures the fluctuations in rates charged for per-mile truckload hauls, showed an increase 7.9% year-over-year. Growing demand and fixed truck capacities indicate that an increase in contract rates will persist throughout 2015, by an average of 4 percent to 9 percent according to Avondale Partners, a securities analyst who partners with Cass for the production of the index.
There are at least 4 reasons why freight shipping is expected to grow in the coming year. These include lower gasoline prices that should result in lower shipping costs, trucking’s growing dominance over other forms of freight transportation, the advantages of trucking over other methods of transport, and a growing focus on funding for roads to accommodate economic growth.
Lower Gas Prices Should Help Lower Shipping Costs
Gas prices have steadily declined over the past several quarters, making the choice for truckload linehauls a more viable option. Crude oil prices have fallen below $100 a barrel and the near-term outlook suggests that these levels will remain at historic lows for some time. This means that the cost of fueling trucks for intercontinental and short hauls are lower, resulting in lower shipping costs across the industry.
Trucking Continues to Dominate All Forms of Freight Transportation
In 1980 trucking represented a little more than 30 percent of freight mile tonnage, according to data compiled by the U.S. Department of Transportation Bureau of Transportation Statistics (BTS). By 2007 this figure had grown to 45 percent of all freight mile tonnage. The next closest mode of freight mile tonnage, railroads, moves just 53 percent of the total amount transported via trucking. A review of the BTS data shows a steady increase in the freight mile tonnage for trucking over the 28-year measuring period, while other forms of transportation (e.g. railroad, pipeline, air, and sea) show declines. All this means is that trucking continues to grow as the preferred choice for the movement of goods from one place to another.
Trucking Better for Short Haul Distribution than Other Modes of Freight Shipping
The recovering economy has stimulated the demand for individuals with commercial driver’s license (CDL) to drive trucks for shipping short distances. The improvements in the economy mean greater demand for goods and an equivalent demand for licensed drivers to move those goods from point to point. More than 100,000 job openings for truckers will need to be filled over the next decade in order to meet the growing consumer demand.
New Focus and Efforts to Rebuild American Roads to Accommodate Growth
Much focus as of late has been placed on the dire needs of America’s infrastructure. Bridges, roads, railroad lines and mass transit systems that are in need of repair, rebuilding and expansion have given rise to calls for public-private partnerships to fund these efforts. The creation of new roadways will bring with it new opportunities for expansion of the country’s freight shipping system, leading to more growth for the industry.